Essilor acquires Transitions Optical ................................................
News
Essilor acquires Transitions Optical, a global leader in photochromic lenses
Essilor International announces the signature of an agreement to acquire the 51% stake in Transitions Optical owned by PPG. Transitions Optical is a leading provider of photochromic lenses to optical manufacturers worldwide.
Read the news release
I never thought it would really happen. Transitions has always been one of PPG's more profitable divisions. It will be interesting to see how this will change the optical landscape.
Zeiss and Hoya would not be able to get Transitions!?!?!?
Photofusion, baby!
Transitions are nice, but it's mostly a marketing giant.
I'm sure they would... at a higher cost. Or there would be certain things only available to Essilor that no one else could get.Originally Posted by LENNY
I couldn't open Chris' attachment but here is a news article about this: PPG Industries plans to sell Transitions Optical subsidiary to Essilor Intl for $1.73 billion
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At what price level will they sell to their own 2 on-line on line optical' s ?
Ok, here's the question:
Was it a sucka deal? How does imbibing technology match up with the free-form future?
FF's (currently, almost all) are totally concave side. Trans imbibing is convex side. No prob.
If Transitions refused to sell to Essilor's competition, or even jacked the price up, it's all the FTC would need to jump in and force divestiture. I think Essilor is too smart for that.
Here is the full text of the Essilor Press release:
Essilor acquires Transitions Optical,
a global leader in photochromic lenses
Charenton-le-Pont, France (July 29, 2013) – Essilor International announces the signature of an agreement to acquire the 51% stake in Transitions Optical owned by PPG. Transitions Optical is a leading provider of photochromic lenses to optical manufacturers worldwide. Following the transaction, Essilor will own 100% of the capital of Transitions Optical. The transaction also includes the acquisition of Intercast, a leading supplier of sun lenses.
The acquisition is fully aligned with Essilor’s growth strategy, which is based on strong innovation in every segment of the optical industry, on visual protection as well as on expansion in the mid-market and in fast-growing countries. It also supports Essilor’s mission of bringing improved vision to more than 4.2 billion people, of whom 2.5 billion do not currently benefit from eye correction.
Founded in the United States 23 years ago and based in Pinellas Park, Florida, Transitions Optical is the inventor of variable-tint plastic lenses. Its business has been developed jointly by Essilor and PPG’s teams. Through innovative capability in photochromics, Transitions Optical designs and produces a wide range of variable-tint lenses that are sold through the networks of its customers, ophthalmic lens manufacturers. The majority of its products are distributed under the Transitions® brand, one of the best-known global optical brands alongside Varilux® and Crizal®. Transitions Optical generated revenue of $814 million in 2012, of which around $310 million with lens manufacturers other than Essilor.
Under the agreement, Essilor will also acquire 100% of the capital of Intercast, a high-performance sun lens manufacturer based in Parma, Italy. In 2012, Intercast revenue stood at nearly $34 million.
Commenting on the transaction, Hubert Sagnières, Essilor’s Chairman and Chief Executive Officer, said: “This agreement marks the start of a new phase of growth for Transitions Optical, which Essilor and PPG have turned into a leader in photochromic lens products. The acquisition of Transitions Optical is fully aligned with Essilor’s strategy. It's a company we know well, so the integration process should be smooth. It will enable us to boost expansion in the photochromic segment, which is growing twice as fast as the optical industry, notably in Asia, Latin America and Europe. The Transitions® brand which, like Varilux® and Crizal® , is a frontline eyecare brand, will continue to be available to all lens manufacturers worldwide.
The acquisition of Intercast will add to Essilor’s positioning in the sun lens segment, which enjoys significant growth potential.
All in all, the integration of Transitions Optical and Intercast into our portfolio of businesses will lead to a significant improvement in the group’s profitability and create value for our shareholders and consumers.”
PPG will remain a key partner for Transitions Optical, as a supplier of dyes as well as long-term research and development services.
The consideration for the transaction amounts to $1.73 billion at closing, as well as a deferred payment of $125 million dollars over five years, for 51 % of the capital of Transitions Optical and 100 % of Intercast.
Based on current estimates, the transaction should have a positive impact on Essilor’s financial indicators:
- A rise in the consolidated contribution margin to 19.5% from year two of the integration;
- An accretive impact on earnings per share as of year one of the integration, and of at least 5% per annum in subsequent years;
- A positive impact of 50 bps on like-for-like growth in consolidated revenue as of year three of the integration.
Following the transaction, which will be entirely funded from Essilor’s cash resources and medium term financing, the consolidated debt-to-equity ratio will remain below 40%.
Subject to various regulatory approvals, the transaction is expected to close during the first half of 2014.
What does Intercast do?
DIDN'T THEY MAKE LEAKY BREAST IMPLANTS OR SOMETHING!?
Last edited by drk; 07-29-2013 at 01:35 PM.
they are gonna swing from Essilors....walnuts.
Follow me here for a second...E paid $1.73 billion cash plus $125 million deferred, so let's say $1.9 billion total paid for the other 51% of Transitions. In other words, they paid $1.9 billion for 51% of an $850 million annual revenue stream. If Transitions drops about 11% to 12% to the bottom line like the rest of E, that means the they will add an additional $40 million in annual profits. Multiply this by their extremely inflated PE of 31 and you get a value of $1.2 billion. So this must mean that in order to be "accretive" (as noted above) Transitions must drop something like 17% to the bottom line.
Looking at it another way, E has a market cap of about $24 billion. If 100% of transitions is worth $3.7 billion, then Transitions is 15% of the value of E. When you think of all that E owns, that seems like an awful lot of value attributed to transitions.
As E notes in this presentation http://www.essilor.com/en/Investors/...ts_Essilor.pdf (see slide 30) Transitions growth has slowed and there is new competition.
But what do I know. These guys know how to play ball (or soccer or whatever it is they play in France). Despite all the acquisitions, they still have a debt to equity ratio well under 1.0. One would assume that a company that has done all of the acquisitions that they have done would be strapped with a ton of debt, but that is clearly not the case. That is pretty good considering this is a business brought to us by the people that built the Maginot Line.
Last edited by Stan Tabor; 07-29-2013 at 02:40 PM.
Nice analysis, Tabor.
nice points... clever dance PPG and Essilor did,\ Because Essilor drug PPG into a lawsuit that made them look bad in other markets they were furious at Essilor. By PPG announcing it early and selling later, they seem to be transparent and unbiased (they can tell regulators, well "no one seemed interested except for Essilor"). Essilor and PPG knew they were going to deal, but I am guessing PPG upped the price to pay for the Transitions collusion gaffs. I am sure there was a clause that excluded PPG from future litigation, and one that PPG would not sue Essilor for loss of good will. Its easier to pay more for a company than pay for a lawsuit.
Could this mean the possible demise of ind labs like us who depend a lot on non E casters for Transitions products?
Just wondering ....................
Just wondering ....................when will Transition facilities be moved into another country with cheaper labour and higher profits like many of the other E owned manufacturing ?
Last edited by Chris Ryser; 07-30-2013 at 06:09 AM.
HMMMM..... I believe that more people are finally seeing the writing on the wall. E will eventually take 70+ percent of the manufacturing and lab business out of this country within in the next few years. Why not? everyone else is doing it, Hoya, Zeiss, Wal-Mart, Luxottica and even several labs. There are several so called "Independent labs" in this country that does not even have any surfacing equipment. All of their lenses are brought in from overseas at rediculas prices and then sold to the ECPs as their own lenses. No one is even thinking about the consequences of a large portion of the Optical work going overseas or to Mexico. No one working=No one buying glasses (except super cheap pairs online or readers, from an Essilor Company). I don't know about anyone else out there, but I am not ready to give up my lab. I still think this business is a lot of fun and has a lot of good people left in the business.
Who really cares?
Cut hay while it is sunny, save for the rainy days, and realize that what you think of the Big Gorillas really doesn't matter. If you think that there is real money to be made in this business at the little guy level, you are sadly mistaken.
Sure...........some Einsteins are making serious coin, but the majority of us DOPES are barely making ends meet and that will continue.
The key is finding a business model that caters to what the spending public WANTS!
Sadly, spectacles are not what the majority of the spending public wants!
MAKE YOUR COIN NOW AND GET OVER IT!
Last edited by Fezz; 07-30-2013 at 06:17 PM.
This posts leaves Stan perplexed and in need of guidance. How can us dopes make our coinage if the spending public does not want to be bespectacled? I thought people who need glasses buy glasses?
I just wonder if this will change the manufacturing model that Transitions uses.
Manufacturer casts the lenses, then "sells" them back to Transitions for "certification", who then "resells" the lenses back to the manufacturer.
Since X-Cel is now part of the beast, and casts Transitions, will X-Cel become self-certifying? Will prices from X-Cel be less expensive because of that?
Just questions floating in my head.
Essilor being smart (we should know that by now).................. will most probably move and consolidate manufacturing into a country where labour is cheap and the product is sold at their established pricing, therefore profit will be higher.
China is not as cheap as it used to be and probably will go the way Japan did in 1950s. Their infrastructure is way more modern than the one in the USA or Canada where everything is falling apart.
The newest and upcoming area is INDIA with a huge population and allready very large investments have been made by both Essilor, as well as Zeiss.
That is only true for a manufactures progressive lenses. All of the single vision and flat top Transitions lenses are already made on Essilor blanks and then repackaged and sold to all of the other manufactures. So even if you buy a 1.501 ft28 Transitions from Hoya, Younger, or Xcel you are already buying an Essilor lens, it is just boxed in the manufactures package. This has been the set up for a while now.
Have to disagree with this. Essilor themselves and through their part ownership of companies are one of the few to keep some of their manufacturing in so-called western countries. Gentex and X-Cel in the US, Nikon in Japan, OLM in Ireland, Shamir in Israel and 2 Transitions facilities in Florida and Ireland. Compare this to CZV who within 5 yrs of the Sola-Zeiss merger closed their Ireland, Germany and Australian facilities and moved everthing to Mexico and China.
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